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CNC

Now, don't misunderstand me, if you are happy with your arrangement, then that is what really matters. And 30 years ago, I'm sure it was the right thing to do.

But let's do a little figuring just for comparison.

If you bought the DA 30 years ago, let's assume that's 1990. And at $480 per month for a total withdrawal of $63,000, that figures almost exactly to 11 years, beginning 2011, or $5,760/yr.

So I set up an Excel SS showing this initial invested amount of $40,000, with the $5,760 withdrawn at the beginning of each year beginning 2011. The $40,000 were it invested in the Vanguard S&P 500 Index fund VFINX January 1, 1990 and all dividends reinvested at the end of each year, here is how it would look today:

1990 Beginning Value: $40,000
Total withdrawals $63,360
Balance of S&P 500 Fund (A/O Feb 1, 2021): $669,313

Current balance of DA: $120,000

Difference: $549,313

However, because this is a taxable account, this does not take into account taxes on any realized gains (dividends and capital gains) on the S&P 500 fund over this period. So to allow for that, if I use the long term median yield on the S&P 500 fund of 1.84% , which if the added tax was paid from cash before reinvested, would be lower than this amount. Assuming your Fed + State rate is 25%, this lowers the annual stated total return rate by 1.84 X .25 = .46%. So reducing each annual total return by this amount (note: I didn't include any capital gains as these would be unusual in an index fund), I get a value today of $570.375. However, for comparison to this, the $120,000 balance would also have to reduced for tax, as it is currently tax deferred. This would adjust to about $90,000....and this does not take into account the favorable tax treatment of the VFINX qualified dividends since 2003 over all DA distributions which will be ordinary income until all earnings are out.

In either case, the difference between what the insurer paid you in the DA net of taxes and what you would have gotten by just putting that initial amount in Vanguard's S&P 500 index fund and paying tax on distributions each year, is substantial. The difference is what you paid Lincoln Financial group for the DA.

Again, I'm not saying you should not have done what you did....only to point out there is a high cost for the ease and convenience of using an insurance company product.

https://finance.yahoo.com/quote/VFINX/performance/

BruceM
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